Operating revenues
decreased $29, or 0.2%, in the second quarter and $64, or 0.3%, for the first six months of 2017, largely due to lower revenues from legacy voice and data products, offset by growth in revenues from consumer IP broadband and satellite video services.
As consumers continue to demand more mobile access to video, we provide streaming access to our subscribers, including mobile access for existing satellite and U-verse subscribers. In November 2016, we launched DIRECTV NOW, our newest video streaming option that does not require either satellite or U-verse service (commonly called over-the-top video service).
Video entertainment
revenues increased $190, or 2.1%, in the second quarter and $306, or 1.7%, for the first six months of 2017, reflecting a 3.5% and 2.3% increase in average revenue per linear (combined satellite and U-verse) video connection and increases of $51 and $72 in advertising revenues, respectively. While linear video losses have continued their recent trend, we are beginning to see the impact of customers wanting mobile and over-the-top offerings, which is contributing to growth in our DIRECTV NOW connections and offsetting linear video subscriber losses. DIRECTV NOW connections continue to grow as we add eligible devices and increase content choices. While our ability to bundle services has also positively impacted subscriber trends and churn, we did experience an increase in churn for subscribers with linear video but no wireless service through AT&T, partially due to pricing increases associated with annual content cost increases and involuntary churn.
High-speed internet
revenues increased $60, or 3.2%, in the second quarter and $198, or 5.4%, for the first six months of 2017, reflecting a 5.1% increase in IP broadband subscribers when compared to the prior year. Also contributing to higher revenues was the increasing trend of subscribers to select higher-speed and higher-rated plans. Average revenue per IP broadband connection (ARPU) increased 0.7% in the first six months of 2017. To compete more effectively against other broadband providers in the midst of ongoing declines in DSL broadband subscribers, we continued to deploy our all-fiber, high-speed wireline network, which has improved customer retention rates.
Legacy voice and data service
revenues decreased $239, or 19.2%, in the second quarter and $496, or 19.4%, for the first six months of 2017. For the six months ended June 30, 2017, legacy voice and data services represented approximately 8% of our total Entertainment Group revenue compared to 10% for the June 30, 2016 period, and reflect second quarter and year to date decreases of $161 and $335 in local voice and long-distance, and $79 and $162 in traditional data billings, respectively. The decreases reflect the continued migration of customers to our more advanced IP-based offerings or to competitors. At June 30, 2017, approximately 7% of our broadband connections were DSL compared to 11% at June 30, 2016.
Operations and support
expenses decreased $11, or 0.1%, in the second quarter and increased $12, or 0.1%, for the first six months of 2017. Operations and support expenses consist of costs associated with providing video content, and expenses incurred to provide our products and services, which include costs of operating and maintaining our networks, as well as personnel charges for compensation and benefits.
AT&T INC.
JUNE 30, 2017
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share and per subscriber amounts
Decreased operations and support expenses in the second quarter were due to merger synergies and efforts to automate and digitize our support activities. These reductions were mostly offset by annual content cost increases and an increase in amortization of deferred customer fulfillment cost.
Increased operations and support expenses for the first six months of 2017 were primarily due to annual content cost increases, deferred customer fulfillment cost amortization, and impacts of storms and flooding on the West Coast that occurred earlier in 2017. Offsetting these increases were the impact of our ongoing focus on cost efficiencies and merger synergies, as well as workforce reductions and lower advertising costs.
Depreciation
expense decreased $31, or 2.1%, in the second quarter, and $100, or 3.4%, for the first six months of 2017. The decreases were primarily due to our fourth-quarter 2016 change in estimated useful lives and salvage value of certain assets. Also contributing to lower depreciation expenses were network assets becoming fully depreciated. These decreases were offset by ongoing capital spending for network upgrades and expansion.
Operating income
increased $13, or 0.8%, in the second quarter and $24, or 0.7%, for the first six months of 2017. Our Entertainment Group segment operating income margin in the second quarter increased from 13.0% in 2016 to 13.1% in 2017, and for the first six months increased from 12.8% in 2016 to 12.9% in 2017. Our Entertainment Group segment EBITDA margin in the second quarter decreased from 24.7% in 2016 to 24.6% in 2017, and for the first six months decreased from 24.5% in 2016 to 24.3% in 2017.
AT&T INC.
JUNE 30, 2017
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share and per subscriber amounts
The following tables highlight other key measures of performance for the Consumer Mobility segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
Percent
|
|
(in 000s)
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
Consumer Mobility Subscribers
|
|
|
|
|
|
|
|
|
|
Postpaid
|
|
|
26,290
|
|
|
|
27,862
|
|
|
|
(5.6
|
)%
|
Prepaid
|
|
|
14,187
|
|
|
|
12,633
|
|
|
|
12.3
|
|
Branded
|
|
|
40,477
|
|
|
|
40,495
|
|
|
|
-
|
|
Reseller
|
|
|
10,182
|
|
|
|
12,869
|
|
|
|
(20.9
|
)
|
Connected devices
1
|
|
|
1,047
|
|
|
|
896
|
|
|
|
16.9
|
|
Total Consumer Mobility Subscribers
|
|
|
51,706
|
|
|
|
54,260
|
|
|
|
(4.7
|
)%
|
1
Includes data-centric devices such as session-based tablets, monitoring devices and automobile systems. Excludes postpaid tablets.
|
|
|
Second Quarter
|
|
|
Six-Month Period
|
|
|
|
2017
|
|
|
2016
|
|
Percent
Change
|
|
|
2017
|
|
|
2016
|
|
Percent
Change
|
|
(in 000s)
|
Consumer Mobility Net Additions
1, 4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postpaid
|
|
|
91
|
|
|
|
72
|
|
|
|
26.4
|
%
|
|
|
25
|
|
|
|
68
|
|
|
|
(63.2
|
)%
|
Prepaid
|
|
|
267
|
|
|
|
365
|
|
|
|
(26.8
|
)
|
|
|
549
|
|
|
|
865
|
|
|
|
(36.5
|
)
|
Branded Net Additions
|
|
|
358
|
|
|
|
437
|
|
|
|
(18.1
|
)
|
|
|
574
|
|
|
|
933
|
|
|
|
(38.5
|
)
|
Reseller
|
|
|
(363
|
)
|
|
|
(446
|
)
|
|
|
18.6
|
|
|
|
(951
|
)
|
|
|
(824
|
)
|
|
|
(15.4
|
)
|
Connected devices
2
|
|
|
86
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
105
|
|
|
|
(27
|
)
|
|
|
-
|
|
Consumer Mobility Net Subscriber Additions
|
|
|
81
|
|
|
|
(10
|
)
|
|
|
-
|
%
|
|
|
(272
|
)
|
|
|
82
|
|
|
|
-
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Churn
1, 3, 4
|
|
|
2.15
|
%
|
|
|
1.96
|
%
|
19 BP
|
|
|
|
2.29
|
%
|
|
|
2.04
|
%
|
25 BP
|
|
Postpaid Churn
1, 3, 4
|
|
|
1.09
|
%
|
|
|
1.09
|
%
|
- BP
|
|
|
|
1.16
|
%
|
|
|
1.16
|
%
|
- BP
|
|
1
Excludes migrations between AT&T segments and/or subscriber categories and acquisition-related additions during the period.
|
|
2
Includes data-centric devices such as session-based tablets, monitoring devices and automobile systems. Excludes postpaid tablets.
|
|
3
Calculated by dividing the aggregate number of wireless subscribers who canceled service during a month divided by the total number
|
|
of wireless subscribers at the beginning of that month. The churn rate for the period is equal to the average of the churn rate for each month of that period.
|
|
4
2017 excludes the impact of the 2G shutdown and a true-up to the reseller subscriber base, which were reflected in beginning of period subscribers.
|
|
Operating Revenues
decreased $395, or 4.8%, in the second quarter and $983, or 6.0%, for the first six months of 2017. Decreased revenues reflect declines in postpaid service revenues due to customers migrating to our Business Solutions segment and choosing unlimited plans, partially offset by higher prepaid service revenues. Our business wireless offerings allow for individual subscribers to purchase wireless services through employer-sponsored plans for a reduced price. The migration of these subscribers to the Business Solutions segment negatively impacted our consumer postpaid subscriber total and service revenue growth.
Service
revenue decreased $420, or 6.0%, in the second quarter and $754, or 5.4%, for the first six months of 2017. The decreases were largely due to the migration of subscribers to Business Solutions and postpaid customers continuing to shift to discounted monthly service charges under our unlimited plans. Revenues from postpaid customers declined $496, or 9.9%, in the second quarter and $1,003, or 9.9%, for the first six months of 2017. Without the migration of customers to Business Solutions, postpaid wireless revenues would have decreased approximately 5.4% for both the second quarter and the first six months of 2017. The decreases were partially offset by higher prepaid service revenues of $201, or 14.7%, in the second quarter and $440, or 16.5%, for the first six months primarily from growth in Cricket and AT&T PREPAID
SM
subscribers.
AT&T INC.
JUNE 30, 2017
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share and per subscriber amounts
Equipment
revenue increased $25, or 2.0%, in the second quarter and decreased $229, or 8.7%, for the first six months of 2017. The increase in the second quarter equipment revenues resulted from higher handset sales and upgrades, a substantial improvement over the first quarter. As previously discussed, equipment revenue is becoming increasingly unpredictable as customers are choosing to upgrade devices less frequently or bring their own.
Operations and support
expenses decreased $160, or 3.4%, in the second quarter and $544, or 5.7%, for the first six months of 2017. Operations and support expenses consist of costs incurred to provide our products and services, including costs of operating and maintaining our networks and personnel expenses, such as compensation and benefits.
Decreased operations and support expenses for the second quarter were primarily due to increased operational efficiencies and lower marketing and advertising costs resulting from the timing of scheduled ad campaigns and integrated advertising. These decreases were partially offset by increased equipment costs due to higher volumes of wireless equipment sales and upgrades.
Decreased operations and support expenses for the first six months were primarily due to lower volumes of wireless equipment sales and upgrades, which decreased equipment and selling and commission costs, and lower marketing and advertising costs resulting from the timing of scheduled ad campaigns and integrated advertising.
Depreciation
expense decreased $61, or 6.5%, in the second quarter and $110, or 5.9%, for the first six months of 2017. The decreases were primarily due to fully depreciated assets, partially offset by ongoing capital spending for network upgrades and expansion.
Operating income
decreased $174, or 6.8%, in the second quarter and $329, or 6.5%, for the first six months of 2017. Our Consumer Mobility segment operating income margin in the second quarter decreased from 31.4% in 2016 to 30.8% in 2017, and for the first six months decreased from 30.7% in 2016 to 30.5% in 2017. Our Consumer Mobility EBITDA margin in the second quarter decreased from 42.8% in 2016 to 42.0% in 2017, and for the first six months decreased from 41.9% in 2016 to 41.7% in 2017.
International
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
|
Six-Month Period
|
|
|
|
2017
|
|
|
2016
|
|
|
Percent
Change
|
|
|
2017
|
|
|
2016
|
|
|
Percent
Change
|
|
Segment operating revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Video entertainment
|
|
$
|
1,361
|
|
|
$
|
1,222
|
|
|
|
11.4
|
%
|
|
$
|
2,702
|
|
|
$
|
2,352
|
|
|
|
14.9
|
%
|
Wireless service
|
|
|
535
|
|
|
|
489
|
|
|
|
9.4
|
|
|
|
1,010
|
|
|
|
944
|
|
|
|
7.0
|
|
Wireless equipment
|
|
|
130
|
|
|
|
117
|
|
|
|
11.1
|
|
|
|
243
|
|
|
|
199
|
|
|
|
22.1
|
|
Total Segment Operating Revenues
|
|
|
2,026
|
|
|
|
1,828
|
|
|
|
10.8
|
|
|
|
3,955
|
|
|
|
3,495
|
|
|
|
13.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations and support
|
|
|
1,772
|
|
|
|
1,723
|
|
|
|
2.8
|
|
|
|
3,531
|
|
|
|
3,311
|
|
|
|
6.6
|
|
Depreciation and amortization
|
|
|
311
|
|
|
|
298
|
|
|
|
4.4
|
|
|
|
601
|
|
|
|
575
|
|
|
|
4.5
|
|
Total Segment Operating Expenses
|
|
|
2,083
|
|
|
|
2,021
|
|
|
|
3.1
|
|
|
|
4,132
|
|
|
|
3,886
|
|
|
|
6.3
|
|
Segment Operating Income (Loss)
|
|
|
(57
|
)
|
|
|
(193
|
)
|
|
|
70.5
|
|
|
|
(177
|
)
|
|
|
(391
|
)
|
|
|
54.7
|
|
Equity in Net Income (Loss) of Affiliates
|
|
|
25
|
|
|
|
9
|
|
|
|
-
|
|
|
|
45
|
|
|
|
23
|
|
|
|
95.7
|
|
Segment Contribution
|
|
$
|
(32
|
)
|
|
$
|
(184
|
)
|
|
|
82.6
|
%
|
|
$
|
(132
|
)
|
|
$
|
(368
|
)
|
|
|
64.1
|
%
|
AT&T INC.
JUNE 30, 2017
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share and per subscriber amounts
The following tables highlight other key measures of performance for the International segment:
|
|
June 30,
|
|
|
Percent
|
|
(in 000s)
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
Mexican Wireless Subscribers
|
|
|
|
|
|
|
|
|
|
Postpaid
|
|
|
5,187
|
|
|
|
4,570
|
|
|
|
13.5
|
%
|
Prepaid
|
|
|
7,646
|
|
|
|
5,059
|
|
|
|
51.1
|
|
Branded
|
|
|
12,833
|
|
|
|
9,629
|
|
|
|
33.3
|
|
Reseller
|
|
|
249
|
|
|
|
326
|
|
|
|
(23.6
|
)
|
Total Mexican Wireless Subscribers
|
|
|
13,082
|
|
|
|
9,955
|
|
|
|
31.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Latin America Satellite Subscribers
|
|
|
|
|
|
|
|
|
|
|
|
|
PanAmericana
|
|
|
8,103
|
|
|
|
7,175
|
|
|
|
12.9
|
|
SKY Brazil
1
|
|
|
5,519
|
|
|
|
5,348
|
|
|
|
3.2
|
|
Total Latin America Satellite Subscribers
|
|
|
13,622
|
|
|
|
12,523
|
|
|
|
8.8
|
%
|
1
Excludes subscribers of our International segment equity investments in SKY Mexico, in which we own a 41.3% stake. SKY Mexico
|
had 8.0 million subscribers at March 31, 2017 and 7.8 million subscribers at June 30, 2016.
|
|
|
Second Quarter
|
|
|
Six-Month Period
|
|
(in 000s)
|
|
2017
|
|
|
2016
|
|
|
Percent
Change
|
|
|
2017
|
|
|
2016
|
|
|
Percent
Change
|
|
Mexican Wireless Net Additions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postpaid
|
|
|
92
|
|
|
|
165
|
|
|
|
(44.2
|
)%
|
|
|
222
|
|
|
|
281
|
|
|
|
(21.0
|
)%
|
Prepaid
|
|
|
402
|
|
|
|
614
|
|
|
|
(34.5
|
)
|
|
|
919
|
|
|
|
1,064
|
|
|
|
(13.6
|
)
|
Branded Net Additions
|
|
|
494
|
|
|
|
779
|
|
|
|
(36.6
|
)
|
|
|
1,141
|
|
|
|
1,345
|
|
|
|
(15.2
|
)
|
Reseller
|
|
|
(18
|
)
|
|
|
(37
|
)
|
|
|
51.4
|
|
|
|
(32
|
)
|
|
|
(74
|
)
|
|
|
56.8
|
|
Mexican Wireless
Net Subscriber Additions
|
|
|
476
|
|
|
|
742
|
|
|
|
(35.8
|
)
|
|
|
1,109
|
|
|
|
1,271
|
|
|
|
(12.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Latin America Satellite Net Additions
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PanAmericana
|
|
|
13
|
|
|
|
81
|
|
|
|
(84.0
|
)
|
|
|
65
|
|
|
|
109
|
|
|
|
(40.4
|
)
|
SKY Brazil
|
|
|
(69
|
)
|
|
|
6
|
|
|
|
-
|
|
|
|
(30
|
)
|
|
|
(95
|
)
|
|
|
68.4
|
|
Latin America Satellite
Net Subscriber Additions
2
|
|
|
(56
|
)
|
|
|
87
|
|
|
|
-
|
%
|
|
|
35
|
|
|
|
14
|
|
|
|
-
|
%
|
1
In 2017, we updated the methodology used to account for prepaid video connections, which were reflected in beginning of period subscribers.
|
|
2
Excludes SKY Mexico net subscriber losses of 18,000 for the quarter ended March 31, 2017 and additions of 398,000 for the quarter ended
|
|
March 31, 2016.
|
Operating Results
Our International segment consists of the Latin American operations acquired with DIRECTV as well as our Mexican wireless operations. Video entertainment services are provided to primarily residential customers using satellite technology. Our international subsidiaries conduct business in their local currency and operating results are converted to U.S. dollars using official exchange rates. Our International segment is subject to foreign currency fluctuations.
Operating revenues
increased $198, or 10.8%, in the second quarter and $460, or 13.2%, for the first six months of 2017. The increases include $139 and $350 from video services in Latin America due to price increases driven primarily by macroeconomic conditions with mixed local currencies. Mexico wireless revenues increased $59, or 9.7%, in the second quarter and $110, or 9.6%, for the first six months of 2017, primarily due to an increase in our subscriber base and higher equipment sales offset by competition and lower ARPU (average revenue per average wireless subscriber) and foreign currency pressures.
AT&T INC.
JUNE 30, 2017
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share and per subscriber amounts
Operations and support
expenses increased $49, or 2.8%, in the second quarter and $220, or 6.6%, for the first six months of 2017. Operations and support expenses consist of costs incurred to provide our products and services, including costs of operating and maintaining our networks and providing video content and personnel expenses, such as compensation and benefits.
The increases in Latin America in the second quarter and for the first six months were primarily due to higher programming and other operating costs. The second quarter was partially offset by favorable foreign currency exchange rates and our reassessment of operating tax contingencies in Brazil. The increases in Mexico in the second quarter and for the first six months were primarily driven by higher operational costs, including expenses associated with our network expansion, partially offset by favorable foreign currency exchange rates.
Depreciation
expense increased $13, or 4.4%, in the second quarter and $26, or 4.5%, for the first six months of 2017. The increases were primarily due to updating the estimated asset lives for video equipment in Latin America and higher capital spending in Mexico.
Operating income
increased $136, or 70.5%, in the second quarter and $214, or 54.7%, for the first six months of 2017. Our International segment operating income margin in the second quarter increased from (10.6)% in 2016 to (2.8)% in 2017, and for the first six months increased from (11.2)% in 2016 to (4.5)% in 2017. Our International EBITDA margin in the second quarter increased from 5.7% in 2016 to 12.5% in 2017, and for the first six months increased from 5.3% in 2016 to 10.7% in 2017.
AT&T INC.
JUNE 30, 2017
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share and per subscriber amounts
Supplemental Operating Information
As a supplemental discussion of our operating results, for comparison purposes, we are providing a view of our combined domestic wireless operations (AT&T Mobility). See "Discussion and Reconciliation of Non-GAAP Measure" for a reconciliation of these supplemental measures to the most directly comparable financial measures calculated and presented in accordance with U.S. generally accepted accounting principles.
AT&T Mobility Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
|
Six-Month Period
|
|
|
|
2017
|
|
|
2016
|
|
|
Percent
Change
|
|
|
2017
|
|
|
2016
|
|
|
Percent
Change
|
|
|
Operating revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
|
|
$
|
14,534
|
|
|
$
|
14,911
|
|
|
|
(2.5
|
)%
|
|
$
|
29,072
|
|
|
$
|
29,709
|
|
|
|
(2.1
|
)%
|
Equipment
|
|
|
2,984
|
|
|
|
3,013
|
|
|
|
(1.0
|
)
|
|
|
5,613
|
|
|
|
6,169
|
|
|
|
(9.0
|
)
|
Total Operating Revenues
|
|
|
17,518
|
|
|
|
17,924
|
|
|
|
(2.3
|
)
|
|
|
34,685
|
|
|
|
35,878
|
|
|
|
(3.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations and support
|
|
|
10,197
|
|
|
|
10,501
|
|
|
|
(2.9
|
)
|
|
|
20,195
|
|
|
|
21,125
|
|
|
|
(4.4
|
)
|
EBITDA
|
|
|
7,321
|
|
|
|
7,423
|
|
|
|
(1.4
|
)
|
|
|
14,490
|
|
|
|
14,753
|
|
|
|
(1.8
|
)
|
Depreciation and amortization
|
|
|
1,992
|
|
|
|
2,081
|
|
|
|
(4.3
|
)
|
|
|
3,989
|
|
|
|
4,137
|
|
|
|
(3.6
|
)
|
Total Operating Expenses
|
|
|
12,189
|
|
|
|
12,582
|
|
|
|
(3.1
|
)
|
|
|
24,184
|
|
|
|
25,262
|
|
|
|
(4.3
|
)
|
Operating Income
|
|
$
|
5,329
|
|
|
$
|
5,342
|
|
|
|
(0.2
|
)%
|
|
$
|
10,501
|
|
|
$
|
10,616
|
|
|
|
(1.1
|
)%
|
The following tables highlight other key measures of performance for AT&T Mobility:
|
|
|
|
|
|
|
|
June 30,
|
|
|
Percent
Change
|
|
(in 000s)
|
|
2017
|
|
|
2016
|
|
Wireless Subscribers
1
|
|
|
|
|
|
|
|
|
|
Postpaid smartphones
|
|
|
59,178
|
|
|
|
58,508
|
|
|
|
1.1
|
%
|
Postpaid feature phones and data-centric devices
|
|
|
18,223
|
|
|
|
18,787
|
|
|
|
(3.0
|
)
|
Postpaid
|
|
|
77,401
|
|
|
|
77,295
|
|
|
|
0.1
|
|
Prepaid
|
|
|
14,187
|
|
|
|
12,633
|
|
|
|
12.3
|
|
Branded
|
|
|
91,588
|
|
|
|
89,928
|
|
|
|
1.8
|
|
Reseller
|
|
|
10,254
|
|
|
|
12,920
|
|
|
|
(20.6
|
)
|
Connected devices
2
|
|
|
34,658
|
|
|
|
28,957
|
|
|
|
19.7
|
|
Total Wireless Subscribers
|
|
|
136,500
|
|
|
|
131,805
|
|
|
|
3.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Branded Smartphones
|
|
|
71,818
|
|
|
|
69,058
|
|
|
|
4.0
|
|
Smartphones under our installment programs at end of period
|
|
|
31,649
|
|
|
|
29,026
|
|
|
|
9.0
|
%
|
1
Represents 100% of AT&T Mobility wireless subscribers.
|
2
Includes data-centric devices such as session-based tablets, monitoring devices and automobile systems. Excludes postpaid tablets.
|
AT&T INC.
JUNE 30, 2017
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share and per subscriber amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
|
Six-Month Period
|
|
|
|
2017
|
|
|
2016
|
|
Percent
Change
|
|
|
2017
|
|
|
2016
|
|
Percent
Change
|
|
(in 000s)
|
Wireless Net Additions
1, 4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postpaid
|
|
|
127
|
|
|
|
257
|
|
|
|
(50.6
|
)%
|
|
|
(64
|
)
|
|
|
386
|
|
|
|
-
|
%
|
Prepaid
|
|
|
267
|
|
|
|
365
|
|
|
|
(26.8
|
)
|
|
|
549
|
|
|
|
865
|
|
|
|
(36.5
|
)
|
Branded Net Additions
|
|
|
394
|
|
|
|
622
|
|
|
|
(36.7
|
)
|
|
|
485
|
|
|
|
1,251
|
|
|
|
(61.2
|
)
|
Reseller
|
|
|
(368
|
)
|
|
|
(459
|
)
|
|
|
19.8
|
|
|
|
(950
|
)
|
|
|
(859
|
)
|
|
|
(10.6
|
)
|
Connected devices
2
|
|
|
2,256
|
|
|
|
1,198
|
|
|
|
88.3
|
|
|
|
4,828
|
|
|
|
2,750
|
|
|
|
75.6
|
|
Wireless Net Subscriber Additions
|
|
|
2,282
|
|
|
|
1,361
|
|
|
|
67.7
|
|
|
|
4,363
|
|
|
|
3,142
|
|
|
|
38.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Smartphones sold under our installment
programs during period
|
|
|
3,583
|
|
|
|
3,960
|
|
|
|
(9.5
|
)%
|
|
|
7,084
|
|
|
|
8,095
|
|
|
|
(12.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Churn
3, 4
|
|
|
1.28
|
%
|
|
|
1.35
|
%
|
(7) BP
|
|
|
|
1.37
|
%
|
|
|
1.38
|
%
|
(1) BP
|
|
Branded Churn
3, 4
|
|
|
1.57
|
%
|
|
|
1.47
|
%
|
10 BP
|
|
|
|
1.64
|
%
|
|
|
1.55
|
%
|
9 BP
|
|
Postpaid Churn
3, 4
|
|
|
1.01
|
%
|
|
|
0.97
|
%
|
4 BP
|
|
|
|
1.07
|
%
|
|
|
1.04
|
%
|
3 BP
|
|
Postpaid Phone Only Churn
3, 4
|
|
|
0.79
|
%
|
|
|
0.84
|
%
|
(5) BP
|
|
|
|
0.84
|
%
|
|
|
0.90
|
%
|
(6) BP
|
|
1
Excludes acquisition-related additions during the period.
|
|
2
Includes data-centric devices such as session-based tablets, monitoring devices and automobile systems. Excludes postpaid tablets.
|
|
3
Calculated by dividing the aggregate number of wireless subscribers who canceled service during a month divided by the total number
|
|
of wireless subscribers at the beginning of that month. The churn rate for the period is equal to the average of the churn rate for each month of that period.
|
|
4
2017 excludes the impact of the 2G shutdown and a true-up to the reseller subscriber base, which were reflected in beginning of period subscribers.
|
|
Operating income
decreased $13, or 0.2%, in the second quarter and $115, or 1.1%, for the first six months of 2017. The second-quarter operating income margin of AT&T Mobility increased from 29.8% in 2016 to 30.4% in 2017 and for the first six months increased from 29.6% in 2016 to 30.3% in 2017. AT&T Mobility's second-quarter EBITDA margin increased from 41.4% in 2016 to 41.8% in 2017 and for the first six months increased from 41.1% in 2016 to 41.8% in 2017. AT&T Mobility's second-quarter EBITDA service margin increased from 49.8% in 2016 to 50.4% in 2017 and for the first six months increased from 49.7% in 2016 to 49.8% in 2017 (EBITDA service margin is operating income before depreciation and amortization, divided by total service revenues).
Subscriber Relationships
As the wireless industry continues to mature, future wireless growth will become increasingly dependent on our ability to offer innovative services, plans and devices and a wireless network that has sufficient spectrum and capacity to support these innovations on as broad a geographic basis as possible. To attract and retain subscribers in a maturing market, we have launched a wide variety of plans, including unlimited, as well as equipment installment programs. Beginning in the first quarter of 2017, we expanded our unlimited wireless data plans to make them available to customers that do not subscribe to our video services.
ARPU
Postpaid phone-only ARPU was $58.30 for the second quarter and $58.20 for the first six months of 2017, compared to $59.80 and $59.66 in 2016. Postpaid phone-only ARPU plus equipment installment billings was $69.04 for the second quarter and $68.93 for the first six months of 2017, compared to $69.97 and $69.75 in 2016. ARPU has been affected by customers shifting to unlimited plans, which decreases overage revenues; however, customers are adding additional devices helping to offset that decline.
AT&T INC.
JUNE 30, 2017
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share and per subscriber amounts
Churn
The effective management of subscriber churn is critical to our ability to maximize revenue growth and to maintain and improve margins. Total churn was lower for the second quarter and first six months of 2017. Postpaid churn was higher for the second quarter and first six months of 2017, reflecting higher tablet churn. Postpaid phone-only churn was lower in the second quarter and first six months of 2017, despite competitive pressure in the industry.
Branded Subscribers
Branded subscribers increased 0.4% in the second quarter of 2017 when compared to March 31, 2017 and increased 1.8% when compared to June 30, 2016. The sequential increase reflects growth of 0.1% and 2.5% in postpaid and prepaid subscribers and the year-over-year rise includes increases of 0.1% and 12.3% in postpaid and prepaid subscribers, respectively.
At June 30, 2017, 92% of our postpaid phone subscriber base used smartphones, compared to 89% at June 30, 2016, with more than 95% of phone sales during both years attributable to smartphones. Virtually all of our postpaid smartphone subscribers are on plans that provide for service on multiple devices at reduced rates, and such subscribers tend to have higher retention and lower churn rates. Device connections on our Mobile Share and unlimited wireless data plans now represent 86% of our postpaid customer base, compared to 82% at June 30, 2016. Such offerings are intended to encourage existing subscribers to upgrade their current services and/or add connected devices, attract subscribers from other providers and/or minimize subscriber churn.
Our equipment installment purchase programs, including AT&T Next, allow for postpaid subscribers to purchase certain devices in installments over a period of up to 30 months. Additionally, after a specified period of time, AT&T Next subscribers also have the right to trade in the original device for a new device with a new installment plan and have the remaining unpaid balance satisfied. For installment programs, we recognize equipment revenue at the time of the sale for the amount of the customer receivable, net of the fair value of the trade-in right guarantee and imputed interest. A significant percentage of our customers choosing equipment installment programs pay a lower monthly service charge, which results in lower service revenue recorded for these subscribers. At June 30, 2017, about 53% of the postpaid smartphone base is on an equipment installment program compared to 50% at June 30, 2016. Over 90% of postpaid smartphone gross adds and upgrades for all periods presented were either equipment installment plans or BYOD.
While BYOD customers do not generate equipment revenue or expense, the service revenue helps improve our margins.
Connected Devices
Connected Devices includes data-centric devices such as session-based tablets, monitoring devices and automobile systems. Connected device subscribers increased 7.0% during the second quarter when compared to March 31, 2017 and 19.7% when compared to June 30, 2016. During the second quarter and first six months of 2017, we added approximately 1.5 million and 3.2 million "connected" cars, respectively, through agreements with various carmakers, and experienced strong growth in other IoT connections as well. We believe that these connected car agreements give us the opportunity to create future retail relationships with the car owners.
OTHER BUSINESS MATTERS
Time Warner Inc. Acquisition
In October 2016, we announced an agreement (Merger Agreement) to acquire Time Warner Inc. (Time Warner) in a 50% cash and 50% stock transaction for $107.50 per share of Time Warner common stock, or approximately $85,400 at the date of the announcement (Merger). Each share of Time Warner common stock will be exchanged for $53.75 per share in cash and a number of shares of AT&T common stock equal to the exchange ratio. The cash portion of the purchase price will be financed with new debt and cash. The transaction remains subject to review by the U.S. Department of Justice and certain foreign jurisdictions, but is expected to close before year-end 2017. See Note 7 for additional details of the transaction and "Liquidity" for a discussion of our financing arrangements.
FirstNet
On March 30, 2017, the First Responder Network Authority (FirstNet) announced its selection of AT&T to build and manage the first nationwide broadband network dedicated to America's first responders. FirstNet expects to provide 20 MHz of valuable telecommunications spectrum and success-based payments of $6,500 over the next five years to support network buildout. We expect to spend about $40,000 over the life of the 25-year contract to build, deploy, operate and maintain the network.
AT&T INC.
JUNE 30, 2017
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share and per subscriber amounts
The actual reach of the network and our investment over the 25-year period will be determined by the number of individual states electing to participate in FirstNet. Individual states are currently reviewing participation plans, and as of July 31, 2017, seven states have opted-in to the program. We do not expect FirstNet to materially impact our 2017 results.
Litigation Challenging DIRECTV's NFL SUNDAY TICKET
More than two dozen putative class actions were filed in the U.S. District Courts for the Central District of California and the Southern District of New York against DIRECTV and the National Football League (NFL). These cases were brought by residential and commercial DIRECTV subscribers that have purchased NFL SUNDAY TICKET. The plaintiffs allege that (i) the 32 NFL teams have unlawfully agreed not to compete with each other in the market for nationally televised NFL football games and instead have "pooled" their broadcasts and assigned to the NFL the exclusive right to market them; and (ii) the NFL and DIRECTV have entered into an unlawful exclusive distribution agreement that allows DIRECTV to charge "supra-competitive" prices for the NFL SUNDAY TICKET package. The complaints seek unspecified treble damages and attorneys' fees along with injunctive relief. The first complaint, Abrahamian v. National Football League, Inc., et al., was served in June 2015. In December 2015, the Judicial Panel on Multidistrict Litigation transferred the cases outside the Central District of California to that court for consolidation and management of pre-trial proceedings. In June 2016, the plaintiffs filed a consolidated amended complaint. We vigorously dispute the allegations the complaints have asserted. In August 2016, DIRECTV filed a motion to compel arbitration and the NFL defendants filed a motion to dismiss the complaint. The court held a hearing on both motions on February 13, 2017.
On June 30, 2017, the court granted the NFL defendants' motion to dismiss the complaint without leave to amend, finding that: (1) the plaintiffs did not plead a viable market; (2) the plaintiffs did not plead facts supporting the contention that the exclusive agreement between the NFL and DIRECTV harms competition; (3) the claims failed to overcome the fact that the NFL and its teams must cooperate to sell broadcasts; and (4) the plaintiffs do not have standing to challenge the horizontal agreement among the NFL and the teams. In light of the order granting the motion to dismiss, the court denied DIRECTV's motion to compel arbitration as moot.
Federal Trade Commission Litigation Involving DIRECTV
In March 2015, the Federal Trade Commission (FTC) filed a civil suit in the U.S. District Court for the Northern District of California against DIRECTV seeking injunctive relief and unspecified money damages under Section 5 of the Federal Trade Commission Act and Section 4 of the Restore Online Shoppers' Confidence Act. The FTC's allegations concern DIRECTV's advertising, marketing and sale of programming packages. The FTC alleges that DIRECTV did not adequately disclose all relevant terms. We vigorously dispute these allegations. On April 4, 2017, we reported to the court that we had reached a written settlement with the FTC Bureau of Consumer Protection. Commission approval is still required. The court scheduled trial to begin on August 14, 2017, if Commission approval has not been secured by that date.
Unlimited Data Plan Claims
In October 2014, the FTC filed a civil suit in the U.S. District Court for the Northern District of California against AT&T Mobility, LLC seeking injunctive relief and unspecified money damages under Section 5 of the Federal Trade Commission Act. The FTC's allegations concern the application of AT&T's Maximum Bit Rate (MBR) program to customers who enrolled in our Unlimited Data Plan from 2007-2010. MBR temporarily reduces in certain instances the download speeds of a small portion of our legacy Unlimited Data Plan customers each month after the customer exceeds a designated amount of data during the customer's billing cycle. MBR is an industry-standard practice that is designed to affect only the most data-intensive applications (such as video streaming). Texts, emails, tweets, social media posts, internet browsing and many other applications are typically unaffected. Contrary to the FTC's allegations, our MBR program is permitted by our customer contracts, was fully disclosed in advance to our Unlimited Data Plan customers, and was implemented to protect the network for the benefit of all customers. In March 2015, our motion to dismiss the litigation on the grounds that the FTC lacked jurisdiction to file suit was denied. In May 2015, the Court granted our motion to certify its decision for immediate appeal. The United States Court of Appeals for the Ninth Circuit subsequently granted our petition to accept the appeal, and, on August 29, 2016, issued its decision reversing the district court and finding that the FTC lacked jurisdiction to proceed with the action. The FTC asked the Court of Appeals to reconsider the decision.
On May 9, 2017, the Ninth Circuit Court of Appeals granted the FTC's petition for
en banc
review, which will be conducted by an eleven-judge panel. The court set oral argument for the week of September 18, 2017, in San Francisco.
In addition to the FTC case, several class actions have been filed also challenging our MBR program. We vigorously dispute the allegations the complaints have asserted.
AT&T INC.
JUNE 30, 2017
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share and per subscriber amounts
Labor Contracts
As of June 30, 2017, we employed approximately 260,000 persons. Approximately 46% of our employees are represented by the Communications Workers of America, the International Brotherhood of Electrical Workers or other unions. After expiration of the agreements, work stoppages or labor disruptions may occur in the absence of new contracts or other agreements being reached.
A summary of labor contract negotiations, by region or employee group, is as follows:
·
|
Approximately 20,000 traditional wireline employees in the Southwest ratified a new contract in April 2017. The new contract will expire in April 2021.
|
·
|
Approximately 5,000 traditional wireline employees primarily in the Midwest ratified a new contract in May 2017. The new contract will expire in June 2022.
|
·
|
Approximately 20,000 mobility employees across the country are covered by a contract that expired in early 2017. We continue to negotiate with labor representatives.
|
·
|
Approximately 15,000 traditional wireline employees in our West region are covered by a contract that expired in April 2016. In July, we reached a tentative agreement on a new four-year contract that will expire in April 2020, if ratified.
|
·
|
Approximately 11,000 former DIRECTV employees were eligible for and chose union representation. Bargaining has resulted in approximately 80% of these employees now being covered under ratified contracts that expire between 2017 and 2021.
|
COMPETITIVE AND REGULATORY ENVIRONMENT
Overview
AT&T subsidiaries operating within the United States are subject to federal and state regulatory authorities. AT&T subsidiaries operating outside the United States are subject to the jurisdiction of national and supranational regulatory authorities in the markets where service is provided.
In the Telecommunications Act of 1996 (Telecom Act), Congress established a national policy framework intended to bring the benefits of competition and investment in advanced telecommunications facilities and services to all Americans by opening all telecommunications markets to competition and reducing or eliminating regulatory burdens that harm consumer welfare. Since the Telecom Act was passed, the Federal Communications Commission (FCC) and some state regulatory commissions have maintained or expanded certain regulatory requirements that were imposed decades ago on our traditional wireline subsidiaries when they operated as legal monopolies. However, based on their public statements and written opinions, we expect the new leadership at the FCC to chart a more predictable and balanced regulatory course that will encourage long-term investment and benefit consumers. In addition, we are pursuing, at both the state and federal levels, additional legislative and regulatory measures to reduce regulatory burdens that are no longer appropriate in a competitive telecommunications market and that inhibit our ability to compete more effectively and offer services wanted and needed by our customers, including initiatives to transition services from traditional networks to all IP-based networks. At the same time, we also seek to ensure that legacy regulations are not further extended to broadband or wireless services, which are subject to vigorous competition.
In March 2017, the FCC circulated a draft order proposing to significantly reduce regulation of the bulk data connections that telecom companies provide to businesses, otherwise known as special access services or business data services.
That order, which was adopted on April 20, 2017, maintains light touch pricing regulation of packet-based services, extends such light touch pricing regulation to high-speed TDM transport services and to most of our TDM channel termination services, based on a competitive market test for such services. For those services that do not qualify for light touch regulation, the order allows companies to offer volume and term discounts, as well as contract tariffs.
In October 2016, a sharply divided FCC adopted new rules governing the use of customer information by providers of broadband internet access service. Those rules were more restrictive in certain respects than those governing other participants in the internet economy, including so-called "edge" providers such as Google and Facebook. On April 3, 2017, the President signed a resolution passed by Congress repealing the new rules under the Congressional Review Act, which prohibits the issuance of a new rule that is substantially the same as a rule repealed under its provisions, or the reissuance of the repealed rule, unless the new or reissued rule is specifically authorized by a subsequent act of Congress. In June 2017, the FCC released an order clarifying that providers of broadband internet access service continue to be subject to privacy
AT&T INC.
JUNE 30, 2017
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share and per subscriber amounts
requirements under section 222 of The Communications Act of 1934 (Communications Act), but not the more restrictive rules that were adopted in October 2016.
In February 2015, the FCC released an order classifying both fixed and mobile consumer broadband internet access services as telecommunications services, subject to Title II of the Communications Act. The FCC's decision significantly expands its authority to regulate the provision of fixed and mobile broadband internet access services. AT&T and other providers of broadband internet access services challenged the FCC's decision before the U.S. Court of Appeals for the D.C. Circuit. In June 2016, a panel of the Court of Appeals upheld the FCC's classification of broadband internet access and the attendant rules by a 2-1 vote. In July 2016, AT&T and several of the other parties that challenged the rules filed petitions with the Court of Appeals asking that the case be reheard either by the panel or by the full Court of Appeals. On May 1, 2017, the Court of Appeals denied the rehearing requests, and on July 20, 2017, the United States Supreme Court extended to September 28, 2017 the deadline for filing petitions for certiorari to review the Court of Appeals decision. In May 2017, the FCC initiated a proceeding to reverse its 2015 decision to classify broadband internet access services as telecommunications services. AT&T fully supports an open internet and believes that Congress must pass bipartisan legislation that codifies core principles of net neutrality while maintaining a stable regulatory environment conducive to investment, future innovation and economic growth.
We provide satellite video service through our subsidiary DIRECTV, whose satellites are licensed by the FCC. The Communications Act of 1934 and other related acts give the FCC broad authority to regulate the U.S. operations of DIRECTV. In addition, states representing a majority of our local service access lines have adopted legislation that enables us to provide IP-based service through a single statewide or state-approved franchise (as opposed to the need to acquire hundreds or even thousands of municipal-approved franchises) to offer a competitive video product. We also are supporting efforts to update and improve regulatory treatment for our services. Regulatory reform and passage of legislation is uncertain and depends on many factors.
We provide wireless services in robustly competitive markets, but are subject to substantial governmental regulation. Wireless communications providers must obtain licenses from the FCC to provide communications services at specified spectrum frequencies within specified geographic areas and must comply with the FCC rules and policies governing the use of the spectrum. While wireless communications providers' prices and offerings are generally not subject to state or local regulation, states sometimes attempt to regulate or legislate various aspects of wireless services, such as in the areas of consumer protection and the deployment of cell sites and equipment. The anticipated industry-wide deployment of 5G technology, which is needed to satisfy extensive demand for video and internet access, will involve significant deployment of "small cell" equipment and therefore increase the need for a quick permitting process.
The FCC has recognized that the explosive growth of bandwidth-intensive wireless data services requires the U.S. government to make more spectrum available. The FCC finished its most recent auction in April 2017 of certain spectrum that is currently used by broadcast television licensees (the "600 MHz Auction").
In May 2014, the FCC issued an order revising its policies governing mobile spectrum holdings. The FCC rejected the imposition of caps on the amount of spectrum any carrier could acquire, retaining its case-by-case review policy. Moreover, it increased the amount of spectrum that could be acquired before exceeding an aggregation "screen" that would automatically trigger closer scrutiny of a proposed transaction. On the other hand, it indicated that it will separately consider an acquisition of "low band" spectrum that exceeds one-third of the available low band spectrum as presumptively harmful to competition. The spectrum screen (including the low band screen) recently increased by 23 MHz. On balance, the order and the spectrum screen should allow AT&T to obtain additional spectrum to meet our customers' needs.
AT&T INC.
JUNE 30, 2017
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share and per subscriber amounts
As the wireless industry continues to mature, future wireless growth will become increasingly dependent on our ability to offer innovative video and data services and a wireless network that has sufficient spectrum and capacity to support these innovations. We continue to invest significant capital in expanding our network capacity, as well as to secure and utilize spectrum that meets our long-term needs. To that end, we have:
·
|
Submitted winning bids for 251 Advanced Wireless Services (AWS) spectrum licenses for a near-nationwide contiguous block of high-quality spectrum in the AWS-3 Auction.
|
·
|
Redeployed spectrum previously used for basic 2G services to support more advanced mobile internet services on our 3G and 4G networks.
|
·
|
Secured the FirstNet contract, which provides us with access to a nationwide low band 20 MHz of spectrum, assuming all states opt-in.
|
·
|
Invested in 5G and millimeter-wave technologies with our in-process acquisition of Fiber Tower Corporation, which holds significant amounts of spectrum in the millimeter wave bands (28 GHz and 39 GHz) that the FCC recently reallocated for mobile broadband services. These bands will help to accelerate our entry into 5G services.
|
LIQUIDITY AND CAPITAL RESOURCES
In anticipation of the Time Warner transaction, we had $25,617 in cash and cash equivalents available at June 30, 2017. Cash and cash equivalents included cash of $2,801 and money market funds and other cash equivalents of $22,816. Approximately $866 of our cash and cash equivalents resided in foreign jurisdictions and were in foreign currencies; these funds are primarily used to meet working capital requirements of foreign operations.
Cash and cash equivalents increased $19,829 since December 31, 2016. In the first six months of 2017, cash inflows were primarily provided by the issuance of long-term debt, and cash receipts from operations, including cash from our sale and transfer of certain wireless equipment installment receivables to third parties. We also received a
$1,438
deposit refund from the FCC. These inflows were offset by cash used to meet the needs of the business, including, but not limited to, payment of operating expenses, funding capital expenditures, debt repayments, dividends to stockholders, and the acquisition of wireless spectrum and other operations. We discuss many of these factors in detail below.
Cash Provided by or Used in Operating Activities
During the first six months of 2017, cash provided by operating activities was $18,160, compared to $18,207 for the first six months of 2016. Lower operating cash flows in 2017 were primarily due to higher cash payments for legal and other settlements, and the timing of working capital payments.
Cash Used in or Provided by Investing Activities
For the first six months of 2017, cash used in investing activities totaled $9,948 and consisted primarily of $10,750 for capital expenditures, excluding interest during construction.
Investing activities also include a refund from the FCC in the amount of $1,438 in April 2017, resulting from the FCC's 600 MHz Auction that concluded in April 2017. We submitted winning bids to purchase spectrum licenses in 18 markets for which we paid $910.
The majority of our capital expenditures are spent on our networks, our video services and related support systems. Capital expenditures, excluding interest during construction, increased $1,048 in the first six months. The increase was primarily due to our continued fiber buildout and timing of build schedules in 2017 compared with 2016. Additionally, in connection with capital improvements, we negotiate favorable payment terms (referred to as vendor financing). For the first six months of 2017, vendor financing related to capital investments was $799. We do not report capital expenditures at the segment level.
We continue to expect our 2017 capital expenditures to be in the $22,000 range, and we expect our capital expenditures to be in the 15% range of service revenues or lower for each of the years 2017 through 2019. The amount of capital expenditures is influenced by demand for services and products, capacity needs and network enhancements. Our capital spending also takes into account existing tax law and does not reflect anticipated tax reform. We are also focused on ensuring DIRECTV merger commitments are met.
AT&T INC.
JUNE 30, 2017
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share and per subscriber amounts
Cash Provided by or Used in Financing Activities
For the first six months of 2017, cash provided by financing activities totaled $11,617 and included net proceeds of $24,115 primarily from the following long-term debt issuances:
·
|
February issuance of $1,250 of 3.200% global notes due 2022.
|
·
|
February issuance of $750 of 3.800% global notes due 2024.
|
·
|
February issuance of $2,000 of 4.250% global notes due 2027.
|
·
|
February issuance of $3,000 of 5.250% global notes due 2037.
|
·
|
February issuance of $2,000 of 5.450% global notes due 2047.
|
·
|
February issuance of $1,000 of 5.700% global notes due 2057.
|
·
|
March issuance of $1,430 of 5.500% global notes due 2047.
|
·
|
March issuance of $800 floating rate global notes due 2020. The floating rate for the notes is based upon the three-month London Interbank Offered Rate (LIBOR), reset quarterly, plus 65 basis points.
|
·
|
March draw of $300 on a private financing agreement with Banco Nacional de Mexico, S.A. due March 2019. The agreement contains terms similar to that provided under our syndicated credit arrangements; the interest rate is a market rate.
|
·
|
May issuance of $1,500 floating rate global notes due 2021. The floating rate for the notes is based upon the three-month LIBOR, reset quarterly, plus 95 basis points.
|
·
|
May issuance of CAD$600 of 2.850% global notes due 2024 and CAD$750 of 4.850% global notes due 2047 (together, equivalent to $994, when issued).
|
·
|
June issuance of £1,000 of 3.550% global notes due 2037, subject to mandatory redemption (equivalent to $1,282 when issued).
|
·
|
June issuance of €750 of 1.050% global notes due 2023, €1,750 of 1.800% global notes due 2026, €1,500 of 2.350% global notes due 2029, €1,750 of 3.150% global notes due 2036 and €1,250 of floating rate global notes due 2023, all except the 2036 global notes are subject to mandatory redemption (together, equivalent to $7,883, when issued).
|
·
|
June issuance of €750 of 1.050% global notes due 2023, €1,750 of 1.800% global notes due 2026, €1,500 of 2.350% global notes due 2029, €1,750 of 3.150% global notes due 2036 and €1,250 of floating rate global notes due 2023, all except the 2036 global notes are subject to mandatory redemption (together, equivalent to $7,883, when issued).
|
On July 27, 2017, we initiated a debt offering for $22,500 that will be completed on August 7, 2017. The proceeds will be used for general corporate purposes, including funding the cash consideration for the Time Warner acquisition and are subject to a special mandatory redemption feature described below. Details for the offering are as follows:
·
|
$750 of floating rate notes due 2023.
|
·
|
$1,750 of 2.850% global notes due 2023.
|
·
|
$3,000 of 3.400% global notes due 2024.
|
·
|
$5,000 of 3.900% global notes due 2027.
|
·
|
$4,500 of 4.900% global notes due 2037.
|
·
|
$5,000 of 5.150% global notes due 2050.
|
·
|
$2,500 of 5.300% global notes due 2058.
|
For notes subject to mandatory redemption if we do not consummate the Time Warner acquisition pursuant to the merger agreement on or prior to April 22, 2018, or, if prior to such date, the merger agreement is terminated, then in either case, we must redeem certain of the notes at a redemption price equal to 101% of the principal amount of the notes, plus accrued but unpaid interest.
During the first six months of 2017, we redeemed $6,118 of debt, primarily consisting of the following:
·
|
$1,142 of 2.400% global notes due 2017.
|
·
|
$1,000 of 1.600% global notes due 2017.
|
·
|
$500 of floating rate notes due 2017.
|
·
|
£750 of 5.875% global notes due 2017.
|
·
|
$750 repayment of a private financing agreement with Export Development Canada due 2017.
|
·
|
$1,150 of 1.700% global notes due 2017.
|
Our weighted average interest rate of our entire long-term debt portfolio, including the impact of derivatives, was approximately 4.3% as of June 30, 2017, compared to 4.2% as of December 31, 2016. We had $142,816
AT&T INC.
JUNE 30, 2017
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share and per subscriber amounts
of total notes and debentures outstanding at June 30, 2017, which included Euro, British pound sterling, Swiss franc, Brazilian real, Mexican peso and Canadian dollar denominated debt that totaled approximately $35,808.
As of June 30, 2017, we had approximately 388 million shares remaining from 2013 and 2014 authorizations from our Board of Directors to repurchase shares of our common stock. During the first six months of 2017, we repurchased approximately 7 million shares totaling $279 under these authorizations. In 2017, we intend to use free cash flow (operating cash flows less construction and capital expenditures) after dividends primarily to pay down debt.
We paid dividends of $6,021 during the first six months of 2017, compared with $5,899 for the first six months of 2016, primarily reflecting the increase in the quarterly dividend approved by our Board of Directors in October 2016. Dividends declared by our Board of Directors totaled $0.49 per share in the second quarter and $0.98 per share in the first six months of 2017 and $0.48 per share in the second quarter and $0.96 for the first six months of 2016. Our dividend policy considers the expectations and requirements of stockholders, capital funding requirements of AT&T and long-term growth opportunities. It is our intent to provide the financial flexibility to allow our Board of Directors to consider dividend growth and to recommend an increase in dividends to be paid in future periods. All dividends remain subject to declaration by our Board of Directors.
At June 30, 2017, we had $10,831 of debt maturing within one year, $10,662 of which was related to long-term debt issuances. Debt maturing within one year includes the following notes that may be put back to us by the holders:
·
|
$1,000 of annual put reset securities issued by BellSouth that may be put back to us each April until maturity in 2021. No such put was exercised during April 2017.
|
·
|
An accreting zero-coupon note that may be redeemed each May until maturity in 2022. In May 2017, $1 was redeemed by the holder for $1. If the remainder of the zero-coupon note (issued for principal of $500 in 2007) is held to maturity, the redemption amount will be $1,029.
|
Credit Facilities
The following summary of our various credit and loan agreements does not purport to be complete and is qualified in its entirety by reference to each agreement filed as exhibits to our Annual Report on Form 10-K.
We use credit facilities as a tool in managing our liquidity status. In December 2015, we entered into a five-year $12,000 revolving credit agreement of which no amounts are outstanding as of June 30, 2017. We also have a $9,155 syndicated credit agreement, of which $4,155 remains outstanding as of June 30, 2017 ($2,286 of which is payable March 2018).
We also enter into various credit arrangements supported by government agencies to support network equipment purchases.
In connection with our pending Merger with Time Warner, we have also entered into a $30,000 bridge loan credit agreement ("Bridge Loan") and a $10,000 term loan agreement ("Term Loan"). Following the June issuances of €7,000 global notes and £1,000 global notes, we reduced the commitments under the Bridge Loan to $21,000. Upon settlement of our July 27, 2017, debt offering, we expect to terminate our bridge loan credit agreement. No amounts will be borrowed under the Term Loan prior to the closing of the Merger. Borrowings under the Term Loan will be used solely to finance a portion of the cash to be paid in the Merger, the refinancing of debt of Time Warner and its subsidiaries and the payment of related expenses.
Each of our credit and loan agreements contains covenants that are customary for an issuer with an investment grade senior debt credit rating as well as a net debt-to-EBITDA financial ratio covenant requiring AT&T to maintain, as of the last day of each fiscal quarter, a ratio of not more than 3.5-to-1. As of June 30, 2017, we were in compliance with the covenants for our credit facilities.
Collateral Arrangements
During the first six months of 2017, we received $957 of additional cash collateral, on a net basis, from banks and other participants in our derivative arrangements. Subsequent to the end of the quarter, approximately $1,336 of additional collateral has been returned to AT&T. Cash postings under these arrangements vary with changes in credit ratings and netting agreements. (See Note 6)
AT&T INC.
JUNE 30, 2017
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share and per subscriber amounts
Other
Our total capital consists of debt (long-term debt and debt maturing within one year) and stockholders' equity. Our capital structure does not include debt issued by our equity method investments. At June 30, 2017, our debt ratio was 53.3%, compared to 50.5% at June 30, 2016, and 49.9% at December 31, 2016. Our net debt ratio was 43.8% at June 30, 2017, compared to 47.6% at June 30, 2016 and 47.5% at December 31, 2016. The debt ratio is affected by the same factors that affect total capital, and reflects our recent debt issuances and repayments.
During the first six months of 2017, we received $2,906 from the monetization of various assets, primarily the sale of certain equipment installment receivables. We plan to continue to explore similar opportunities.
In 2013, we made a voluntary contribution of a preferred equity interest in AT&T Mobility II LLC (Mobility), the holding company for our U.S. wireless operations, to the trust used to pay pension benefits under our qualified pension plans. The preferred equity interest had a value of $8,294 as of June 30, 2017, and $8,477 as of December 31, 2016, does not have any voting rights and has a liquidation value of $8,000. The trust is entitled to receive cumulative cash distributions of $560 per annum, which are distributed quarterly in equal amounts. We distributed $280 to the trust during the first six months of 2017. So long as we make the distributions, the terms of the preferred equity interest will not impose any limitations on our ability to declare a dividend or repurchase shares.
AT&T INC.
JUNE 30, 2017
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share and per subscriber amounts
DISCUSSION AND RECONCILIATION OF NON-GAAP MEASURE
We believe the following measure is relevant and useful information to investors as it is used by management as a method of comparing performance with that of many of our competitors. This supplemental measure should be considered in addition to, but not as a substitute of, our consolidated and segment financial information.
Supplemental Operational Measure
We provide a supplemental discussion of our domestic wireless operations that is calculated by combining our Consumer Mobility and Business Solutions segments, and then adjusting to remove non-wireless operations. The following table presents a reconciliation of our supplemental AT&T Mobility results.
|
|
Three Months Ended
|
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
|
|
Consumer Mobility
|
|
|
Business Solutions
|
|
|
Adjustments
1
|
|
|
AT&T Mobility
|
|
|
Consumer Mobility
|
|
|
Business Solutions
|
|
|
Adjustments
1
|
|
|
AT&T Mobility
|
|
Operating Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless service
|
|
$
|
6,528
|
|
|
$
|
8,006
|
|
|
$
|
-
|
|
|
$
|
14,534
|
|
|
$
|
6,948
|
|
|
$
|
7,963
|
|
|
$
|
-
|
|
|
$
|
14,911
|
|
Fixed strategic services
|
|
|
-
|
|
|
|
3,028
|
|
|
|
(3,028
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
2,805
|
|
|
|
(2,805
|
)
|
|
|
-
|
|
Legacy voice and data services
|
|
|
-
|
|
|
|
3,508
|
|
|
|
(3,508
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
4,162
|
|
|
|
(4,162
|
)
|
|
|
-
|
|
Other service and equipment
|
|
|
-
|
|
|
|
844
|
|
|
|
(844
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
874
|
|
|
|
(874
|
)
|
|
|
-
|
|
Wireless equipment
|
|
|
1,263
|
|
|
|
1,721
|
|
|
|
-
|
|
|
|
2,984
|
|
|
|
1,238
|
|
|
|
1,775
|
|
|
|
-
|
|
|
|
3,013
|
|
Total Operating Revenues
|
|
|
7,791
|
|
|
|
17,107
|
|
|
|
(7,380
|
)
|
|
|
17,518
|
|
|
|
8,186
|
|
|
|
17,579
|
|
|
|
(7,841
|
)
|
|
|
17,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations and support
|
|
|
4,520
|
|
|
|
10,313
|
|
|
|
(4,636
|
)
|
|
|
10,197
|
|
|
|
4,680
|
|
|
|
10,857
|
|
|
|
(5,036
|
)
|
|
|
10,501
|
|
EBITDA
|
|
|
3,271
|
|
|
|
6,794
|
|
|
|
(2,744
|
)
|
|
|
7,321
|
|
|
|
3,506
|
|
|
|
6,722
|
|
|
|
(2,805
|
)
|
|
|
7,423
|
|
Depreciation and amortization
|
|
|
871
|
|
|
|
2,335
|
|
|
|
(1,214
|
)
|
|
|
1,992
|
|
|
|
932
|
|
|
|
2,521
|
|
|
|
(1,372
|
)
|
|
|
2,081
|
|
Total Operating Expense
|
|
|
5,391
|
|
|
|
12,648
|
|
|
|
(5,850
|
)
|
|
|
12,189
|
|
|
|
5,612
|
|
|
|
13,378
|
|
|
|
(6,408
|
)
|
|
|
12,582
|
|
Operating Income
|
|
$
|
2,400
|
|
|
$
|
4,459
|
|
|
$
|
(1,530
|
)
|
|
$
|
5,329
|
|
|
$
|
2,574
|
|
|
$
|
4,201
|
|
|
$
|
(1,433
|
)
|
|
$
|
5,342
|
|
1
Non-wireless (fixed) operations reported in Business Solutions segment.
|
|
AT&T INC.
JUNE 30, 2017
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share and per subscriber amounts
|
|
Six Months Ended
|
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
|
|
Consumer Mobility
|
|
|
Business Solutions
|
|
|
Adjustments
1
|
|
|
AT&T Mobility
|
|
|
Consumer Mobility
|
|
|
Business Solutions
|
|
|
Adjustments
1
|
|
|
AT&T Mobility
|
|
Operating Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless service
|
|
$
|
13,137
|
|
|
$
|
15,935
|
|
|
$
|
-
|
|
|
$
|
29,072
|
|
|
$
|
13,891
|
|
|
$
|
15,818
|
|
|
$
|
-
|
|
|
$
|
29,709
|
|
Fixed strategic services
|
|
|
-
|
|
|
|
6,002
|
|
|
|
(6,002
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
5,556
|
|
|
|
(5,556
|
)
|
|
|
-
|
|
Legacy voice and data services
|
|
|
-
|
|
|
|
7,138
|
|
|
|
(7,138
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
8,535
|
|
|
|
(8,535
|
)
|
|
|
-
|
|
Other service and equipment
|
|
|
-
|
|
|
|
1,661
|
|
|
|
(1,661
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
1,733
|
|
|
|
(1,733
|
)
|
|
|
-
|
|
Wireless equipment
|
|
|
2,394
|
|
|
|
3,219
|
|
|
|
-
|
|
|
|
5,613
|
|
|
|
2,623
|
|
|
|
3,546
|
|
|
|
-
|
|
|
|
6,169
|
|
Total Operating Revenues
|
|
|
15,531
|
|
|
|
33,955
|
|
|
|
(14,801
|
)
|
|
|
34,685
|
|
|
|
16,514
|
|
|
|
35,188
|
|
|
|
(15,824
|
)
|
|
|
35,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations and support
|
|
|
9,048
|
|
|
|
20,489
|
|
|
|
(9,342
|
)
|
|
|
20,195
|
|
|
|
9,592
|
|
|
|
21,659
|
|
|
|
(10,126
|
)
|
|
|
21,125
|
|
EBITDA
|
|
|
6,483
|
|
|
|
13,466
|
|
|
|
(5,459
|
)
|
|
|
14,490
|
|
|
|
6,922
|
|
|
|
13,529
|
|
|
|
(5,698
|
)
|
|
|
14,753
|
|
Depreciation and amortization
|
|
|
1,744
|
|
|
|
4,647
|
|
|
|
(2,402
|
)
|
|
|
3,989
|
|
|
|
1,854
|
|
|
|
5,029
|
|
|
|
(2,746
|
)
|
|
|
4,137
|
|
Total Operating Expense
|
|
|
10,792
|
|
|
|
25,136
|
|
|
|
(11,744
|
)
|
|
|
24,184
|
|
|
|
11,446
|
|
|
|
26,688
|
|
|
|
(12,872
|
)
|
|
|
25,262
|
|
Operating Income
|
|
$
|
4,739
|
|
|
$
|
8,819
|
|
|
$
|
(3,057
|
)
|
|
$
|
10,501
|
|
|
$
|
5,068
|
|
|
$
|
8,500
|
|
|
$
|
(2,952
|
)
|
|
$
|
10,616
|
|
1
Non-wireless (fixed) operations reported in Business Solutions segment.
|
|
AT&T INC.
JUNE 30, 2017
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Dollars in millions except per share amounts
At June 30, 2017, we had interest rate swaps with a notional value of $10,775 and a fair value of $15.
We have fixed-to-fixed and floating-to-fixed cross-currency swaps on foreign currency-denominated debt instruments with a U.S. dollar notional value of $38,694 to hedge our exposure to changes in foreign currency exchange rates. These derivatives have been designated at inception and qualify as cash flow hedges with a net fair value of $(2,337) at June 30, 2017.
Item 4. Controls and Procedures
The registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by the registrant is recorded, processed, summarized, accumulated and communicated to its management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. The chief executive officer and chief financial officer have performed an evaluation of the effectiveness of the design and operation of the registrant's disclosure controls and procedures as of June 30, 2017. Based on that evaluation, the chief executive officer and chief financial officer concluded that the registrant's disclosure controls and procedures were effective as of June 30, 2017.
AT&T INC.
CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS
Information set forth in this report contains forward-looking statements that are subject to risks and uncertainties, and actual results could differ materially. Many of these factors are discussed in more detail in the "Risk Factors" section. We claim the protection of the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995.
The following factors could cause our future results to differ materially from those expressed in the forward-looking statements:
·
|
Adverse economic and/or capital access changes in the markets served by us or in countries in which we have significant investments, including the impact on customer demand and our ability and our suppliers' ability to access financial markets at favorable rates and terms.
|
·
|
Changes in available technology and the effects of such changes, including product substitutions and deployment costs.
|
·
|
Increases in our benefit plans' costs, including increases due to adverse changes in the United States and foreign securities markets, resulting in worse-than-assumed investment returns and discount rates; adverse changes in mortality assumptions; adverse medical cost trends; and unfavorable or delayed implementation or repeal of healthcare legislation, regulations or related court decisions.
|
·
|
The final outcome of FCC and other federal, state or foreign government agency proceedings (including judicial review, if any, of such proceedings) involving issues that are important to our business, including, without limitation, special access and business data services; intercarrier compensation; interconnection obligations; pending Notices of Apparent Liability; the transition from legacy technologies to IP-based infrastructure, including the withdrawal of legacy TDM-based services; universal service; broadband deployment; wireless equipment siting regulations; E911 services; competition policy; privacy; net neutrality, including the FCC's order classifying broadband as Title II services subject to much more comprehensive regulation; unbundled network elements and other wholesale obligations; multi-channel video programming distributor services and equipment; availability of new spectrum, on fair and balanced terms; and wireless and satellite license awards and renewals.
|
·
|
The final outcome of state and federal legislative efforts involving issues that are important to our business, including deregulation of IP-based services, relief from Carrier of Last Resort obligations and elimination of state commission review of the withdrawal of services.
|
·
|
Enactment of additional state, local, federal and/or foreign regulatory and tax laws and regulations, or changes to existing standards and actions by tax agencies and judicial authorities including the resolution of disputes with any taxing jurisdictions, pertaining to our subsidiaries and foreign investments, including laws and regulations that reduce our incentive to invest in our networks, resulting in lower revenue growth and/or higher operating costs.
|
·
|
Our ability to absorb revenue losses caused by increasing competition, including offerings that use alternative technologies or delivery methods (e.g., cable, wireless, VoIP and over-the-top video service), subscriber reluctance to purchase new wireless handsets, and our ability to maintain capital expenditures.
|
·
|
The extent of competition including from governmental networks and other providers and the resulting pressure on customer totals and segment operating margins.
|
·
|
Our ability to develop attractive and profitable product/service offerings to offset increasing competition.
|
·
|
The ability of our competitors to offer product/service offerings at lower prices due to lower cost structures and regulatory and legislative actions adverse to us, including state regulatory proceedings relating to unbundled network elements and non-regulation of comparable alternative technologies (e.g., VoIP).
|
·
|
The continued development and delivery of attractive and profitable video offerings through satellite and IP-based networks; the extent to which regulatory and build-out requirements apply to our offerings; and the availability, cost and/or reliability of the various technologies and/or content required to provide such offerings.
|
·
|
Our continued ability to maintain margins, attract and offer a diverse portfolio of wireless service and devices and device financing plans.
|
·
|
The availability and cost of additional wireless spectrum and regulations and conditions relating to spectrum use, licensing, obtaining additional spectrum, technical standards and deployment and usage, including network management rules.
|
·
|
Our ability to manage growth in wireless video and data services, including network quality and acquisition of adequate spectrum at reasonable costs and terms.
|
·
|
The outcome of pending, threatened or potential litigation (which includes arbitrations), including, without limitation, patent and product safety claims by or against third parties.
|
·
|
The impact from major equipment failures on our networks, including satellites operated by DIRECTV; the effect of security breaches related to the network or customer information; our inability to obtain handsets, equipment/software or have handsets, equipment/software serviced in a timely and cost-effective manner from suppliers; and in the case of satellites launched, timely provisioning of services from vendors; or severe weather conditions, natural disasters, pandemics, energy shortages, wars or terrorist attacks.
|
·
|
The issuance by the Financial Accounting Standards Board or other accounting oversight bodies of new accounting standards or changes to existing standards.
|
·
|
Our ability to integrate our acquisition of DIRECTV.
|
·
|
Our ability to close our pending acquisition of Time Warner Inc. and successfully integrate its operations.
|
·
|
Our ability to adequately fund our wireless operations, including payment for additional spectrum, network upgrades and technological advancements.
|
·
|
Our increased exposure to video competition and foreign economies, including foreign exchange fluctuations as well as regulatory and political uncertainty.
|
·
|
Changes in our corporate strategies, such as changing network-related requirements or acquisitions and dispositions, which may require significant amounts of cash or stock, to respond to competition and regulatory, legislative and technological developments.
|
·
|
The uncertainty surrounding further congressional action to address spending reductions, which may result in a significant decrease in government spending and reluctance of businesses and consumers to spend in general.
|
·
|
The uncertainty and impact of anticipated regulatory and corporate tax reform, which may impact the overall economy and incentives for business investments.
|
Readers are cautioned that other factors discussed in this report, although not enumerated here, also could materially affect our future earnings.
AT&T INC.
PART II – OTHER INFORMATION
Dollars in millions except per share amounts
We discuss in our Annual Report on Form 10-K various risks that may materially affect our business. We use this section to update this discussion to reflect material developments since our Form 10-K was filed. For the second quarter 2017, there were no such material developments.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) A summary of our repurchases of common stock during the second quarter of 2017 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Period
|
(a)
Total Number of
Shares (or Units)
Purchased
1, 2, 3
|
|
(b)
Average Price Paid
Per Share (or Unit)
|
|
(c)
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs
1
|
|
(d)
Maximum Number (or
Approximate Dollar
Value) of Shares (or
Units) That May Yet Be
Purchased Under The
Plans or Programs
|
|
|
|
|
|
|
|
|
|
|
April 1, 2017 -
April 30, 2017
|
12,802
|
|
$
|
41.46
|
|
-
|
|
395,550,000
|
May 1, 2017 -
May 31, 2017
|
7,272,174
|
|
|
38.43
|
|
7,254,000
|
|
388,296,000
|
June 1, 2017 -
June 30, 2017
|
642,772
|
|
|
38.84
|
|
-
|
|
388,296,000
|
Total
|
7,927,748
|
|
$
|
38.43
|
|
7,254,000
|
|
|
1
In March 2014, our Board of Directors approved an additional authorization to repurchase up to 300 million shares of our common
|
stock. In March 2013, our Board of Directors authorized the repurchase of up to an additional 300 million shares of our common stock.
|
The authorizations have no expiration date.
|
2
Of the shares repurchased, 46,300 shares were acquired through the withholding of taxes on the vesting of restricted stock
|
and performance shares or on the exercise price of options.
|
3
Of the shares repurchased, 627,448 shares were acquired through reimbursements from AT&T maintained Voluntary Employee Benefit
|
Association (VEBA) trusts.
|
Exhibits identified in parentheses below, on file with the Securities and Exchange Commission, are incorporated by reference as exhibits hereto. Unless otherwise indicated, all exhibits so incorporated are from File No. 1-8610.
|
|
12
|
Computation of Ratios of Earnings to Fixed Charges
|
31
|
Rule 13a-14(a)/15d-14(a) Certifications
31.1
Certification of Principal Executive Officer
31.2
Certification of Principal Financial Officer
|
32
|
Section 1350 Certifications
|
101
|
XBRL Instance Document
|
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
August 3, 2017
|
|
|
AT&T Inc.
/s/ John J. Stephens
John J. Stephens
Senior Executive Vice President
and Chief Financial Officer
|